tv Bloomberg Markets Americas Bloomberg December 27, 2016 10:00am-11:01am EST
vonnie: we are waiting for breaking news. consumer confidence reports coming out now. we will see if it is as good as the university of michigan figures. 113.7. analysts looking for 114.9. once again, consumer confidence a double reading better than forecast. at consumer confidence index 113.7. if anything were to send the dow to 20,000, that could do it. the dow trading at 19,968. that newsn up before as well. we will go into the details little more in a moment. go to abigail doolittle, who has more on market moves. abigail: welcome back.
looking at closing record highs in the s&p 500 and nasdaq to the nasdaq trading at an all-time high see the down -- at an all-time high. the dow lacking a little. the big story is whether or not 20,000.can achieve we have been watching for that for some time. if it happened last week, it would have been the fastest 1000 point rise for the dow since the 2000's. now, it will match the fastest streak in 1939 of 35 calendar days. we will watch if that will happen. there is risk on the markets with stocks trading higher. oil trading higher for its seventh day in a row. since opec and not affect cut supply barrels.
gas and gold trading higher. looking at the 10 year yield, it is housing -- having its biggest spike in about two weeks. this is represented in the red. three basis points. this matches the risk on pictures asked stocks rally and bonds are selling off. vonnie: i will actually take it from you because they are still on vacation in london. boxing day holiday. thank you. mark will be back with us next week. let's check in on the bloomberg first word news. taylor riggs has more. taylor: the palestinian president says he hopes the upcoming conference in france will set a timetable for independence after the u.n. delivered a harsh rebuke over israeli land claims over that palestinians. want to makeans that part of the city their future capital.
russians have found the flight recorder for the plane that crashed into the black sea. investigators will use the device to figure out why the military transport jet plunged minutes after takeoff. all 92 people on board are believed to have died. the secretary-general of the united nations will end his term in new york's time square. ban ki-moon will press the button to start the crystal ball drop to signal the beginning of the new year. u.s. senator john mccain says there is no doubt the russians tried to influence u.s. elections by hiking. he says there is doubt whether whether it had an effect on the results. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. vonnie: thanks.
there are still a few trading days in 2016. we are keeping an i on the dow. we have -- keeping an eye on the dow. at 19,972.39 now. bank spoke earlier on daybreak americas. he told about what he needs to have happen to reach his s&p target. >> the corporate tax cut is crucial to get to a number like .400. in the new year, investors will be hungry for details on this tax package. -- once the target s&p gets over 2300, it depends on how the legislation takes shape. >> so you have the forecast. but in the asterisk with the cut,rate task cut -- tax
you have the official and then the effective tax rate. >> that is the key question. we have been talking about a scenario of the u.s. rate going -- 35% to 25%. we are arguing there should be a six-point reduction in the effective tax rate for the s&p. that makes the s&p go from keeping 72% of its profits to 78% of its profits. $10 per share. >> you also take a look at how they will pay for this tax cut. plans. paul ryan has for example, things like illuminating the interest reduction. that could make a difference as to whether flows to the bottom line or not. >> part of the reason we are analyzing the 25% corporate tax
rate rather than going lower is it helps us argue if there are things like a reduction, we probably get an even lower tax rate than 25, but you still get a net benefit of $10. however, figuring out who the winners and losers are are a lot more complicated with the details in the proposal. because of the complexity, particularly around things like order taxes, i think they find out they need to keep it single and keep the tax rate in line with the oecd average. >> let's get to the forecast. it? tax cut, what is >> i think the s&p would only be at 2300 by the end of 2017. market, and the s&p 500 maybe less so than the dow, is the euphoria around fiscal
stimulus. how much do you have to pay attention to that? >> the deregulation and infrastructure spending and tax cuts from corporate to personal are all part of this package. i think corporate tax cuts are the most important. there is excitement around infrastructure. you pick your number. the point is we spoke to investors and point out the u.s. ofs $250 billion per year infrastructure spending. i think it will be hard to get over $300 billion. >> so who are the winners and who are the losers? be $119 in will 2016. one of the big sources of earnings growth in 2017 should the the energy sector. i suspect around a $55 average in oil. that should at six dollars in the s&p earnings. financialsnergy and
in the tax cut, i expect only 5% earnings growth. that is basically the same sales growth and flat margins. >> you are bullish on someone in the index next year. but where do you think people will take away from this? are about the sectors reflation or aggressive cyclical rotation. and energy, industrials, materials, i think that is under born. i am underweight on them. whatd myself bearish on may be a rising market overall. i agree there should be an improvement in products. and health care. that is not to be ignored, given the valuations and strong track. vonnie: deutsche bank's chief equity strategist david bianco.
coming up, we hear from bank of america's brian moynihan. about the purchase of merrill lynch. and a recap of the breaking economic news. consumer confidence rising. int is versus 109.4 december. the strong number from the conference board. a double helping of strong consumer confidence. this is bloomberg. ♪
business stories in the news now. u.s. regulators have halted several early stage blood counter studies. this after four patients suffered liver damage and out. genetics -- seattle toshiba could have a write-down of several billion dollars on its u.s. nuclear operations. the japanese company says it will disclose the impact on earnings as soon as possible. it has to do with its westinghouse electric units. reconsiderays it may the future of its nuclear business. a sign that they labor unions in the u.s. are bracing for tough times. cut -- the seiu is thean for a 30% budget cut --
seiu is preparing for a 30% budget cut. turning now to bank of america. brian monahaneo has been working to simplify the stretch of the bank. he presided over a lot of consolidation. he spoke about his strategy in an exquisite interview with weston in boston. weston in boston. brian: when i interviewed, i had a list of everything that did not its with the core consumer franchise. core commercial banking franchise. capital markets franchise. it came through a lot of the enterprises we acquired. we needed to deal with it. i showed the board, and if we took the risk out of those out,ess, to the capital took the complexity out, you
could tighten for company. so we went from $2.7 trillion in assets to $2.2 trillion. we went from credit card operations in five or six countries too, if we complete down to onee, country. it was based on a basic principle that our basic business model was all of our businesses operate in the united states. and then we have our corporate investment banking business. because corporations are large global beings. -- andhad that list done we are largely done with it -- it has taken a while to finish it. when you flip to the other side, for us to buy a depository in the united states. it has nothing to do with dodd-frank. it was before that. if you have more than 10% deposits, you cannot buy. it makes my life easier, because
we did not have to worry about that. to grow the banking business, it has to be organic. that is why we will try to round out the markets that, by happenstance, we are in. that is why we try to build our bank in new york, philadelphia. it is all organic. more financial advisors in more u.s. trusts. more commercial bankers. more people in the branches serving customers. and more branches. buy anything. so think about a company that has been around in various parts for 200 plus years. acquisitions, and how easy my job is relatively, because i cannot do it. now it is a huge company. that burden is not small, babies -- interesting place to be but it is an interesting place to be.
that was brian moynihan speaking exclusively with david weston. still ahead, the path of monte paschi continues to unfold. the italian bank needs more rescue money than previously expected. we are live with the latest. -- plus, the dow nearing 20,000. this after better than forecast consumer confidence, and particularly the expectations were lower than previous months. but expectation rose a good 10 points when it comes to consumer providence -- confidence. this is bloomberg. ♪
raised last week. for more, let's go to dan liefgreen in bloomberg, mmilan's bureau chief -- milan's bureau chief. why is the ecb making this calculation? dan: a bit of as surprise, actually. they saide amount monte paschi needs to raise is almost twice what the bank tried to raise from the market. the 5 billion operation that they'll last week. they base it on a couple of things. the stress test. the stress test taken over the summer. and the latest liquidity features -- figures. summer 30thween the and 31st, liquidity drop sharply. presumably, that is why they are justifying this larger number
for monte dei paschi's capital situation. vonnie: the italian government getting involved in the bailout is almost illegal, according to some. yet other countries have seen taxpayer bailouts. what is the future for the taxpayer bailout? dan: well, the future is quite complicated. this will be an overnight process. it will drag on weeks and months. monte dei paschi has to get together a new business plan. this has to be submitted to european authorities as well. what they are looking at is trying to avoid big losses, primarily for retail investors. it is viewed as him was a caretaker government in the run-up to elections next year. it will not be easy. there are literally thousands. what they think so far is
slumping these bonds they hold into new shares in the bank. at the end of the process, probably dropping back or getting more secure bonds guaranteed by the government. that is a preliminary plan now. vonnie: is it possible the european commission will allow this to go ahead? i would say there is a good chance. primarily because the bank, as well as the finance minister, have remained in close contact. they are not really taking major moves without discussing the people in brussels and frankfurt with the ecb before they do this. i am sure there will be tweaks requested, but using this , they have very specific guidelines that they are trying to meet. vonnie: square this out for us.
you see that the bank is trying losses.major but it is the broader taxpayer, those who do not even bank at monte paschi, who would suffer if the bailout does not go ahead. dan: one of the arguments they have been using is this is an important bank. what the government approved last week was also improved potentially. they are mostly a smaller been nice -- midsized bank. so the government literally cannot afford the 20 million they set aside to give it all to monte paschi. frankly, there have to be losses suffered. there has to be burden sharing if it will at least meet the
requirements set out by the european union in bailouts. vonnie: will this produce a contagion effect in the sense it would set president -- precedent? think this will certainly be a test case for the new rules for new european banks. there is no question about that. that is why we have already seen some concerns from germany particularly. and that italian banks do not have an advantage. the other thing we have to keep in mind is that they are italy's biggest bank. unicredit will go in the first quarter of next year. with a 13 billion euro capital raise they will try to do on the market without any government assistance. vonnie: why are shares suspended now?
stock marketian regulator, last friday, made the decision, essentially because they want this plan, this complicated realization, recapitalization, they want all of the details wrapped up an and approved before stocks start trading. get thethey want to bases and framework of what is going to happen before -- the basis and framework of what is going to happen. vonnie: dan liefgreen, thank you. now let's check on early movers in u.s. trading with abigail doolittle. abigail: technology really taking off today. ,e look at the s&p 500 imap which gives you a quick look at what is happening within an index. first of all, lots of green.
the best performing sector is information technology. up 8/10 of 1%. behind the strength is facebook, amazon, netflix, and apple. see the screen here. interestingly, there's best bidders not seem to be much behind it. some of these names just react well on days where there is a little volatility. but facebook, this is the first up day in seven. amazingly,ter now, facebook is down 8%, the first quarter since 2012, not so long after facebook's ipo. the 90 weakness is the fake news issue and for some investors were disappointed from the last report. but back in the bloomberg, we look at this great chart. the bank rate is alive and well. this is the merrill lynch index
over the last two years. a beautiful uptrend. we also have nice consolidation to that trend. consolidating toward its two day moving average. sellers try to push the bank stocks down. just nice consolidation here. and after the last test around the election, where there was weakness in the tech stock, we see it as a higher now. vonnie: i look forward to the rest of the session, but because we have great economic data out as well. abigail doolittle there. withwith us, we talk donald trump and his weighing in on u.s.-israeli relations next. this is bloomberg. ♪ with the xfinity tv app,
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let's check bloomberg's word news. taylor riggs has more. taylor: president obama says if he had been allowed to run again, he could at eton -- enaton donald trump -- beat donald trump. ma: i am confident in this vision, because i am confident that if i had run again and articulated it, i think i could have mobilized a majority of the american people to mobilize behind it. i know in conversations i have had with people around the country, even some people who disagreed with me, they would say that the vision, the direction that you point towards is the right one. onlor: trump responded twitter, writing no way. in a few hours, the leader of japan will visit the place where
japan's sneak attack brought the u.s. into world war ii. shinzo abe will visit the uss arizona memorial with president obama. in germany, a new poll finds more than half surveyed believes chancellor angela merkel will be able to overcome major political challenges in the year ahead. merkel is running for a fourth term. argentina's all has been fired as finance minister. has beeno prat-gay fired as finance minister. he was just on-the-job one year. we are learning more about the death of george michael. his partner says he found his partner dead in bed christmas day. police are calling the death of unexplained but not suspicious. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.
i am taylor riggs. this is bloomberg. vonnie: thanks. we are less than one month away being sworntrump in. democrats are already preparing for a battle over taxes, warning the tax cuts directed at wealthiest will face united opposition. joining us now is our political reporter, kevin cirilli. we have gone a lot of rhetoric from the president-elect. does it appear he will go ahead with these tax cuts? he will.think perhaps what is more telling is that democrats are already mobilizing to oppose some of the president-elect's tax policy proposals. you have to remember that house speaker paul ryan has really made tax reform one of the crux issues of his speakership that he would really like to see through. i'll try and -- paul ryan has repeatedly tried to get tax
reform through congress. newnow, heading into a administration with a republican president and republican-controlled house and senate, they are hoping they will at least the able to get corporate tax reform, lowering that rate from 35% to about 15%, if trump gets his way. however, with negotiations, i would anticipate that to be higher. vonnie: what do you hear from the democrats? what do you plan -- what do they plan to oppose this? kevin: they will say first that this is not a deal for middle class and lower middle class americans. this is a deal for wall street. disagreens and trump with that. the second point i would make is this will create a vacuum for there to be new leadership in the opposition party within the democratic party. look for people like senator elizabeth warren and, of course,
senator bernie sanders to really be leading that opposition and crafting the messaging to oppose directly the trump administration. how well that shapes out, i think we will see that early on, within the first 100 days. faces wehese are the saw throughout the campaign. is there anything to suggest they should be any more effective when it comes to opposing something then they were in the last few months? would it be better to have fresh faces oppose the incoming administration's positions? kevin: great point. i spoke with a democratic strategist who told me there is growing concern within the democratic party that there are not, if you will, political rock stars coming up. creates ans also opening for there to be a new type of democratic leader to rise up through the ranks. the bottom line is trump does
not have the super majority in the senate. he still needs to work with and look from people like senator jon tester from montana. these are democrats who to work with donald trump, simply because if you look at their state, there are a lot of trump supporters in the midwest. vonnie: a lot of developments foreign policy wise and comments about the u.n. a more serious development over the weekend with the resolution on israel. how are democrats and the current administration viewing what may happen going for in terms of u.s.-israel relations? israeli prime minister benjamin netanyahu coming out forcibly -- forcefully against the obama administration and the
vote happening at the united nations. and trump taking the direct opposite approach and winning some praise from the israeli government. obviously, israel is such an important ally to the u.s. but this is not the first time the israeli government has criticized the u.s. government. they have a strong critique against the iran deal. but it does create an opening for the incoming administration to perhaps show a more warm tone towards israel. whenave to remember that trump was first running for office, he was criticized for not being pro-israel enough. watched hise candidacy and watched his transition efforts, with the exception for history for u.s. ambassador to israel, there has been a warmer tone shown towards israel. vonnie: john kerry is expected to make what is probably his
final statement on the middle east and particularly u.s., israel, palestine relations. is that a wasted effort at this point? kevin: i am not sure i would call it a wasted effort, but i would note this comes at a time in which israel has repeatedly criticized this administration. i also think it comes at a time where the syria crisis and refugee crisis has truly become more of a problem. so i think there is going to be a law the administration is going to have to say as week -- so i think there's going to be a lot the administration is going to have to say. and a lot of the attention is on rex tillerson, his could be successor to john kerry. so a lot of attention already shifting towards the incoming administration to see what they will do.
bloombergvin cirilli, politics reporter. thank you. coming up, we look at the rally in the stock market and if it will continue. jonathan golub gives his outlook. and the dow 30 points away from the 20,000 mark. no real movement after consumer confidence came and asked ordinarily strong -- came in extraordinarily strong. this is bloomberg. ♪
deutsche bank getting a break from regulators as the imf lowers the bank's capital goals. tesla is focusing on a new project for solar technology. and in today's could take -- quicktakes, we look at puerto ofo as a tries to get out its hole of $70 billion. deutsche bank will have to go over a lower capital hurdle. the imf says it will be said at 9.1% as opposed to the current requirements of 10.76%. will startanasonic making solar cells and modules buffalo, new york. panasonic will invest more than one quarter billion dollars in the project. the companies are already jointly creating a lithium-ion gig-factory. boostabi is trying to
trading volume and attract foreign investors. adx, as the local exchange is known, has been meeting with the united arab emirates. imf managing director is calling on europe to clean up its banks. he talked to bloomberg television about the reason they are not living up to their potential. region for thel advanced economies has been week business investment. that is for all advanced economies. thate: he went on to say they do not work well under heavy fines. >> time for the bloomberg quicktake's. the population
of oklahoma and an economy smaller than kansas. it also has more debt. $70 billion. here's the situation. the federal oversight board that their congress created in june is moving closer to restructuring the island's debt. a resumed talks with creditors in november, warning that spending cuts are needed. when the governor elect takes office in early january, he will have considerably less power than any of his presidency is -- president says -- predecessors. the board is a result of the largest federal inve -- intervention. it leaves more than $9 million in fees. 1.2 $6 billion in bond sales
since 2000. investment banks work with officials in san want to create new bonds backed by proceeds. this helped with the government, which employs more than one quarter of the workforce, put off cuts. madeinancial control board up of four republicans and three democrats, chosen from a list provided by congressional leaders, is supposed to help puerto rico make the politically untenable decisions. it would have to make hard decisions about services that affects all residents. and the idea of an additional service tax is not popular. when the board held its first meeting and november, it was met by protesters. you can read more about puerto rico and all of our quicktake's on the bloomberg. head to bloomberg.com for more stories. vonnie: that to the markets now.
last week, we heard from jonathan golub, chief u.s. economist at rbc. optimistic just as for next year? here is his playbook for 2017. jonathan: i was bullish last year. we surpassed my target. we have a 2500 target to the end of 2017, about 10% up from here. the way you play it within the market is really different now than a year ago. promarkets become more cyclical, taking advantage of the potential policies and also of the fact that the labor market pushes interest rates up as it becomes tighter. i found reallyse interesting is obviously everyone trying to gain out -- g ame out the incoming
administration. one thing you talk about is what corporate tax cuts could add to profits. let's say there are no corporate tax cuts. what is the backdrop look like, even if you do not look at a stimulative administration? adding 02 2017e earnings from anything trump will do. the only thing that could happen is because interest rates are jumping up, it is productive for bank earnings. banks and one out of every five dollars in the s&p. at its tois points their value. the big jump in earnings growth is you no longer have a track from energy prices. so higher -- you no longer have a drag from energy prices. eps.kes you to about 7.5% 2% of that is buybacks, which means you are about 5% to 5.5%
of the no earnings. it is not a crazy number. in 2018 is when you have a chance of really getting these benefits, whether it is taxes, regulations, or the like. why is it that investors are quick to respond to incomplete administration -- information? is there a thinking that analysts will basically catch up and that justifies the game? jonathan: you raise the most important points, which is the job of an investor is to say with what i know i this moment. it is always incomplete information. what do i do now with my money or my client's money. they have to weigh each option and jump in the water, whether they like it or not. analysts are asked to be more specific. how much do i think of the
earnings that come from these policies? if they do not have enough information to assess these things, they are more likely to leave their numbers stale. up andhave a p that goes e waiting for more clarity. so what appears to be happening is the stock market is getting more expensive. are rising.hat pe's but that is not really the issue. acting with partial information, and the other is waiting for complete information. you have a timing cap, not a gap,tion problem -- timing not a valuation problem. christmasill ahead, is on the books now. which retailers came out on top. this is bloomberg.
vonnie: this is "bloomberg markets." -- i am vonnie quinn vonnie quinn. there are some warning signs that retail sales may not be as pure. joined byi am bloomberg gadfly's shelly banjo. people are out there spelling. retailers are ceiling -- see ok sales. it will not blow anyone out of the water, but it will not be anyone bad. vonnie: our discounts making up for the deficit? morey: we are seeing
discounting, which is a surprise. retailers worked hard to pull wouldnventory, so they not have to go crazy. but we are seeing more discounts and then i think people were expecting. vonnie: we had a good black friday. that pull sales from the christmas season? shelly: i think they did. those shopping events really capital -- catapulted people into the stores. it is a long season. six weeks or even more. it will keep going throughout january. people go back into return things and pick up even more stuff. vonnie: the economy has been growing and there has been some ,age increases, but generally there's a malaise, particularly among the middle class or lower. where are we seeing spending? still at home.
people spending it on homes. ella tronics -- electronics. toys did pretty well during the holidays. where you are really seeing a decline is clothing. apparel continues to go down. vonnie: are there particular retailers just not getting it right? our consumers looking for something different from apparel retailers? is departmentk it stores. they cannot get people into their stores. they are getting cut by amazon on all sorts of things, from clothing to beauty. all of the things you used to go into the department store for. and it does not like you have to go into a department store. shelly: exactly. vonnie: we got consumer confidence numbers that blew us away. it was at 113.7, the highest since 2001. and it was the expectation component that really rose. is there a disconnect there?
shelly: yes. it is fascinating to see how high consumer confidence has gone. but when you look at personal spending numbers, they are not there. betweenthis gap confidence and spending numbers get bigger. that is the first time it has happened in a while. so you ask what is going on? why are people confident about the future but are not spending today? throughout -- housing is fairly high, but even.ng is fairly manufacturers are high, but the actual amount of people spend is fairly even. so why are people so excited about the future? it is not enough to get them to spend for today. about: when we think interest rate and where they should be, whether they should be putting away money or refinancing? shelly: i think some people do,
but the majority of the people think, "this is how much i get in my paycheck." incomes are rising, but not enough. and the saving rate is steady. people are still stocking money, and they will not put everything on their credit card, knowing they may not be able to get a raise next year. today: there is a note that says macy's looks like the standout winner. though jcpenney did pretty well, getting its fair share along with kohl's. it seems department stores were not completely miserable. what do they do to keep figures up? a jcpenney is probably the standout i saw, going through a couple of different malls in the country, particularly black friday. delaware.one in jcpenney really increased the amount of home appliances, beauty. sephora in their stores.
they are trying to get the things people want to buy. if you do not want to buy close as much, what else do you pack that people may want to? banjo, shelley -- shelly thank you. coming up, what will central banks do in the new year? simons of jeffries is our guest. plus, we are watching the markets. 19,966 on the dow. 2000 271.0 at the nasdaq of 7/10 of 1%. this is bloomberg. ♪
vonnie: we are going to take you from new york to zurich in the next hour to cover stories of washington dc and japan. will yields continue their big climb as donald trump compares -- prepares to take office? the outlook for bonds in the new year. oil prices surging with oil on its longest winning streak in four months. prices continue to push higher in the year ahead or will the opec deal run into trouble? and changes are coming for deutsche bank. it will have a lower bar to clear when it comes to capital growth requirements. more on that move. markets in the united kingdom are closed today for the two-day christmas and boxing day holidays. french and german markets are open and it has been trading but we are higher. here is how high they are trading. the stoxx europe